*
Main U.S. indexes struggle for direction, virtually unchanged
*
Materials weakest S&P 500 sector; cons disc leads gainers
*
Dollar ~flat; crude gains; gold down >1%; bitcoin dips
*
U.S. 10-Year Treasury yield ~flat at ~3.55%
Welcome to the home for real-time coverage of markets brought to
you by Reuters reporters. You can share your thoughts with us at
REGIONAL BANKS STILL OUT OF FAVOR (1255 EDT/1655 GMT) Just a week after the biggest banks kicked off the first-quarter earnings season, the sector - after more than a month of wild volatility - was distinctly out of favor again on Friday, with the S&P bank index down around 1%. To be fair, Friday's lowest point for the index was still more than 3% higher than its close on Thursday April 13, the session just before companies including JPMorgan issued their reports and cheered up investors last Friday.
Moves in the bigger universal banks are not as pronounced this Friday, but the regionals are doing more than their fair share of dragging on the index.
Zions Bancorp is last down 5.4% after already falling 4.9% on Thursday. While Zions had closed up 7.4% on Wednesday after its premarket quarterly report that day, investors have visibly soured on the stock since then.
The next biggest loser is Truist Financial , down 5.3% after already falling 3.8% on Thursday in the wake of its quarterly report. Keycorp is down 4.7% Friday after a 2.8% fall on Thursday following its before-market-open quarterly report. US Bancorp , is off 4.0%.
These stocks are underperforming the S&P 500 regional bank index which is down 3.0% for the day and on track for a ~6% three-session drop.
It probably didn't help that Keith Lerner, co-chief investment officer at Truist Wealth downgraded the financial sector broadly to underweight from neutral. Lerner says he expects the sector to be challenged by a weakening economy weighing on earnings and says "valuations aren’t compelling." Still the broader S&P 500 financial index is holding up better than banks with a 0.5% drop on the day.
(Sinéad Carew)
*****
HEADING FOR A ROLLER COASTER? (1215 EDT/1615 GMT) With the S&P 500 trading not too far from the top end of its trading range after emerging from its October low, John Lynch, chief investment officer at Comerica Wealth Management, outlined his expectations for stocks from here.
He cautions that "the equity market is poised to struggle in the weeks and months ahead" due to "a combination of declining earnings, weakening economic growth, a steadfast Federal Reserve, and a lack of broad participation." With weakening economic data, decreased bank lending, and a Federal Reserve with a “higher for longer” view on rates, he sees the S&P 500 pricing in a "mild recession scenario by retesting the October lows." But the investor is certainly not without hope, as he points to full employment and solid cash levels as reasons to suspect that already the equity market "will begin to price in a 2024 recovery in the second half of this year." With that in mind, he's kept a year-end target range of 4,100-4,200 for the S&P.
Still, a test of October lows would mean a 15.5% drop from the benchmark's Thursday's closing level. And from there, reaching the midpoint of Lynch's year-end target would involve a ~19% increase. So maybe hang onto your hats, and don't look down?
(Sinéad Carew)
*****
INDIVIDUAL INVESTOR PESSIMISM REMAINS ABOVE AVERAGE -AAII (1141 EDT/1541 GMT) Pessimism among individual investors stayed above average for the ninth-straight week in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, optimism rose slightly, while neutral sentiment declined. AAII reported that bearish sentiment, or expectations that stock prices will fall over the next six months, edged up 0.6 percentage points to 35.1%.
After a stretch of "unusually high levels," pessimism has
been closer to its average for the last three weeks. However,
bearish sentiment is still above its historical average of 31.0%
for the 69th time in the past 74 weeks.
Bullish sentiment, or expectations that stock prices will
rise over the next six months, gained 1.2 percentage points to
27.2%. Optimism remains at an "unusually low level." Bullish
sentiment remains below its historical average of 37.5% for the
72nd time out of the past 74 weeks.
Neutral sentiment, or expectations that stock prices will
stay essentially unchanged over the next six months, slipped 1.8
percentage points to 37.7%. Neutral sentiment continues to be
above its historical average for the 15th time out of the past
16 weeks.
With these changes, the bull-bear spread narrowed slightly
to –7.9 percentage points from -8.4 percentage points last week:
Though individual investors mostly approved of the Fed's latest interest rate hike being smaller, AAII noted that inflation, market volatility and the rate of economic growth continues to influence individual investors’ short-term outlook for stocks.
(Terence Gabriel)
*****
DOES PMI WARMING TREND = HOTTER INFLATION? (1100 EDT/1500 GMT) Business activity in the United States is gaining some heat this month.
S&P Global's advance "flash" purchasing manager indexes (PMI) mid-month temperature takes on the manufacturing and services sectors, both landed above 50, signifying monthly expansion.
The manufacturing PMI surprised analysts by crossing over that line, rising 1.2 points to 50.4, while services gained 1.1 points to 53.7. Consensus expectations called for readings of 49 and 51.5, respectively. Together, they form a composite print of 53.5, 1.2 points warmer than March and the highest composite number in 11 months.
While news about economic resiliency is fine and dandy for recession worry-warts, a drill-down into the report shows input and output costs both rose, prompting the steepest jump in operating costs in three months, to "historical levels," according to S&P Global. "The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January," writes Chris Williamson, chief business economist at S&P Global. "However, the upturn in demand has also been accompanied by a rekindling of price pressures. Average prices charged for goods and services rose in April at the sharpest rate since September of last year." Below we see composite output and input costs against core CPI:
Financial markets are 88% certain that the Federal Reserve will implement another 25 basis point rate hike at the conclusion of next month's policy meeting as part of its ongoing battle against inflation, according to the CME's FedWatch Tool. But while recent data suggests a gradual inflation cool-down, any upward price pressures are decidedly unwelcome. Wall Street wobbled in the wake of the report, but was red at last glance.
(Stephen Culp)
*****
WALL STREET SEARCHES FOR DIRECTION (1015 EDT/1415 GMT) Wall Street equities started Friday's session in a ho-hum manner, disinclined to move that much in either direction, but then lost steam soon after the release of economic data with all three major indexes turning red and Nasdaq falling most. There has since been some firming, with the main indexes now all around flat. U.S. business activity accelerated to an 11-month high in April, according to a survey on Friday, which was at odds with growing signs that the economy was in danger of slipping into recession as higher interest rates cool demand. When looking at data investors are calculating the outlook for interest rates as well as the strength of the economy as the Fed has been laser focused on dampening high-inflation.
The U.S. 10-year Treasury yield reacted more notably, hitting its high for the session so far after the data.
Still, under the hood, the S&P 500 consumer staples sector is pushing higher with the strongest gains in Procter & Gamble .
A quarterly update from the company, which sells everything
from washing detergent to toothpaste, showed customer acceptance
of repeated price hikes, allowing it to boost its third-quarter
margins and raise its full-year sales forecast.
All three indexes so far, are tracking for small declines
for the week and the Dow is eyeing its first weekly loss out of
five weeks.
A week in, the start of earnings season has brought a mixed
bag of goods so far with Refinitiv data pointing to a lop-sided
81 negative EPS pre-announcements vs 26 positive. But out of the
88 S&P 500 companies that had reported Q1 results at the time of
its research publication, so far ~76% had beaten Wall Street's
earnings expectations while ~19% had reported earnings that fell
short of estimates. And in aggregate earnings were 7.8% above
expectations vs the average beat of 4.1% going back to 1994.
Here is your snapshot from 1023 EST:
(Sinéad Carew)
*****
S&P 500 INDEX: BEARS START TO STIR? (0900 EDT/1300 GMT) The S&P 500 index fell about 0.6% on Thursday to end at 4,129.79. That said, it was its biggest drop in about a month. Given recently compressed volatility, traders are on guard for any downside acceleration in the SPX:
The S&P 500's intraday range as a percentage of the prior day's close has recently seen some relatively narrow readings. In fact, the seven-tightest readings by this measure so far this year have occurred since late March. Three of those sessions happened Monday-Wednesday of this week. The tightest reading was 0.53% on April 11. This was the lowest since Nov. 25 of last year, which was the post-Thanksgiving holiday shortened session. On Thursday, however, this measure jumped to 0.82% from 0.68% on Wednesday. The 2023 average is 1.32% per session. Additionally, with this, the CBOE volatility index , ticked up from its lowest level since November 2021. Thus, traders are on alert for an increase in volatility, as it tends to coincide with periods of instability. This, as the SPX has struggled to clear weekly cloud resistance at 4,155. On Tuesday and Wednesday of this week, the index ended within decimals of this barrier, only to break to the downside on Thursday. The next support below Thursday's 4,114,57 low is in the 4,078-4,069 area. The 50-day moving average ended Thursday at about 4,034. A weekly close above 4,155 may put bears back in their caves, though another stiff resistance barrier resides in the 4,195-4,203 area.
(Terence Gabriel)
*****
FOR FRIDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPX04212023 Wall Street loses a little steam after data Flash PMI PMI operating costs and inflation AAII04212023 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
